Secondary Ticketing

Sharon Hodgson Excerpts

Tuesday 13th March 2012 Westminster Hall

[Mike Weatherley]

I could not agree more. I will come on to that point in a moment—it is on an industrial scale now. The intention of the person buying the ticket is important. If the intention is to make a profit, I argue that that is to the detriment of the industry.

It can be argued that there are occasions where intermediaries, such as agents, or, in this example, ticket touts, provide a supply and demand service. However, in the case of exceptional excess demand for a finite product, supply cannot be increased to match demand. With only a finite number of hours available to the performers, the free market falls down due to a restriction of supply. Ticket touts who take advantage of that market imperfection do nothing to add to our creative industries in terms of revenue and profits to those putting on the shows.

In addition to profit being driven into the hands of those who have done nothing to nurture and develop the product, there is the added consideration of who owns the product being performed. I hope that everyone listening to this debate will readily agree that a performance belongs to an artist, and that the artist has the right to be in control of the terms of that performance. Indeed, today the French Government have enacted a law stating specifically that. Any hon. Member who wishes to explore further why the protection of intellectual property rights is so important may wish to check out my “Rock the House” website, www.rockthehouse2012.com, which goes into that particular debate in some detail. The creative person should at all times be able to retain control of how the end product is produced, marketed and used.

I am well aware of the argument that artists realise the full value of the ticket sales, so who are they to complain if others also make a profit? That argument, however, falls down on three counts. First, there are many reasons why a business may wish to price at below full market value, such as market penetration and reward for loyalty. There is differential pricing in football stadiums; for example, in a young persons area where the club wishes to build a fan base. They could sell at a much higher rate, but choose to price market segment. The clubs would be disadvantaged if those young persons simply sold on their tickets for a profit—that would defeat the intention of a lower-priced ticket. I will come on to the Olympic example later.

Secondly, another reason would be to control the type of person attending—for example, crowd separation at football matches. That argument is well established in other areas, too. There are restrictions on who can buy certain properties, such as affordable housing units that cannot be bought by speculators and sold at an immediately higher value to someone not in the target housing audience. In addition, a band may wish to have a young crowd at the front of the stage, rather than people who can afford the premium pricing, which would not necessarily create the same atmosphere.

Thirdly, there is criminality relating to ticket forgeries and organised crime, which I will come on to later. I should point out at this point that I am not totally against the on-selling of tickets. There must be a mechanism that allows ticket buyers to recover the price of their ticket, and maybe make a small profit for their troubles, if they cannot attend. That could be done via a fan-to-fan website. That is an essential safeguard, but it is the intention when buying the ticket that is the most important consideration. We saw recently, with the debenture ticket holders story at the Royal Albert hall, that some were buying their debenture—or season ticket, if you prefer—with no intention of going to the shows, but because they were able to make a profit of 10 times the face value.

At the moment, with huge profits available for popular events, tickets are being purchased on an industrial scale, with no intention of going to the event itself. People up and down the country are contracted by ticket organisations—or are freelance themselves—that make it their job to sit at banks of computers to buy the maximum allocation of tickets at face value as soon as they go on sale. As we saw on the “Dispatches” programme a few weeks ago, some companies are willing to use their staff, and credit cards obtained for this specific purpose, to buy tickets and resell for a profit.

Before I move on, may I just address the issues brought up in the “Dispatches” programme? A lot of the focus of the programme was based on artists, promoters or venues holding tickets back and using free market mechanisms to sell tickets at an additional profit to the benefit of those putting on the concert or event. I see nothing wrong with that if it is done with the copyright holder’s permission. It seems that that was given, since it would appear that the promoter ticket allocation, for example, was in the contracts. That was known to all parties and is no different from premium pricing at the front end. It is simply a mechanism that reduces the risk to the artist on pricing, and shares that with those operating the system for them. Some artists grade their tickets from the outset at a higher premium value. We have heard about certain artists charging £1,000 for tickets in the front row. The mechanism on fan-to-fan websites is no different from that; it just uses the free market to set the price. What was wrong, as mentioned earlier, was where the secondary ticket seller was buying, via a network of intermediary operators, for the specific purpose of on-selling at a profit to them, not to the artist.

That brings me on to the Olympics. As is well known and accepted as a matter of principle, it is against the law to on-sell an Olympic ticket, whether at a profit or not—it must be sold back to the organiser. It strikes me as baffling that the Government accept this for a specific sporting event and promote strong enforcement, but are reluctant to take action for the benefit of our creative industries. Some 6.6 million Olympic tickets have been sold to the public, raising £527 million. That figure could have been much more, but the price was set and the Government seek to enforce it so it remains a “games for all”, and not just those who can pay the premium. Some 25% of tickets have been held back for other purposes, such as corporate sales and other premium pricing, but a decision was taken that 75% of the tickets should go to enthusiastic fans at a specific price below market value. The atmosphere inside the arena will benefit as a result, contributing to what I am sure will be a fantastic games.

The Home Secretary is so determined to crack down on touts, the fine was raised from £5,000 to £20,000. In May 2011, she said:

“The 2012 Games will be a once-in-a-lifetime opportunity to experience the Games on home soil. By increasing fines for touting we are sending a clear message to criminals…that it is not worth their while and they are not welcome.”

The police, under Operation Podium, have announced that every ticket tout caught will also be pursued to recover their assets, with no maximum limit to the amount that can be recovered. Additionally, internet companies such as eBay and Gumtree could also face action if they do not take immediate action, once notified of illegal activity.

The worry about the effects of ticket touting goes further. Detective Chief Inspector Nick Downing, in charge of Operation Podium, said:

“we have already seen the demand for Olympic tickets which gives criminals greater opportunity to run scams, sell non-existent tickets and even steal your personal and credit card details to use in other crimes…As soon as you allow things to go out of control, opportunities for criminals grow. And I do not want London to be associated with disappointment at finding out all the money paid out was to criminals and no tickets exist”.

That last point could have been echoed by any bank manager, who I am sure would worry about exactly the same thing.

Although examples that I have given show that extensive action is, and can be, taken to prevent ticket touting at the games, it only serves to highlight the lack of action taken against ticket touts at other events. Without legislation, artists are forced to think of innovative ways to prevent touts. Glastonbury, for example, uses a picture of every ticket holder and other events have insisted that people bring with them the credit card used to purchase tickets. But this fails in a number of ways, from the father wanting to give a present to his kids, to those who do not have a credit card or driving licence as proof of identification. Such approaches can also create problems with crowd surges before curtain-up: checking 10,000 IDs will add to entrance delays, which venues are not geared up to handle, and there are obvious safety concerns—and anyway, it adds to the Big Brother state, which surely we should avoid if we can.

I am pleased that the ticket sales for the games have gone well. The Olympics are inspirational in so many ways and I hope that the Minister will be inspired by the ticketing arrangements for the London games and use that inspiration to help all our creative industries and events that could benefit similarly from Government and police assistance.

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

I know that the hon. Gentleman is probably just about to wind up, so I thank him for giving way. I wanted to listen to his speech in full and not interrupt along the way. He has made an excellent speech, as I would expect, because he is knowledgeable about this subject. With everything that he has said, and taking into account everything that he knows about what is going on, which “Dispatches” highlighted, does he think that the time has come for the Government to consider legislation, and not just say that the industry has to try to regulate itself?

[Mike Weatherley]

I thank the hon. Lady for her intervention and I applaud her efforts in this field, without which I would never have been alerted to the issue. I thank her for that. I agree and France does, too. As I said, France has gone live today with a law specifically about this form of ticket touting, which is along the lines of the hon. Lady’s private Member’s Bill, which although introduced did not get past the next stage.

I am not advocating that every ticketed event be subject to additional legislative support. Many artists and events will be happy for the secondary market to buy and sell their tickets, but those that wish to have protection should be able to apply for support under law, in the same way the Olympics did. If it is good enough for the world’s premier sporting event, it should be good enough for our creative industry, which is worth protecting before we lose the world-beating position Britain currently enjoys.

--- Later in debate ---

[The Minister for Sport and the Olympics (Hugh Robertson)]

I congratulate my hon. Friend the Member for Hove (Mike Weatherley) and acknowledge, as other hon. Members have done, his expertise in this subject since he first came to Parliament and beforehand. Given that his speech was mainly about the music industry, I apologise for not being my hon. Friend the Member for Wantage (Mr Vaizey), who is normally the Minister responsible for matters musical. For some reason—I suspect because of the Olympics—the responsibility for such matters lies in my portfolio.

I will deal with various points that my hon. Friend has made. First, I am aware that there has been a spike of interest about secondary market issues, following the recent edition of the “Dispatches” programme, which he mentioned. I take the points that he made. I gather that the Office of Fair Trading has been asked to investigate a number of allegations made in that programme. As a result, I am told that I am not in a position to comment further on those allegations at the moment.

Secondly, my hon. Friend mentioned the Olympics. Let us be clear that we did not introduce a ban on secondary ticketing because we in this country thought that the Olympics needed such protection. To be brutally honest with my hon. Friend, we did it because it was a requirement of the bid. The International Olympic Committee requires that. A country has to sign up to a number of things in that regard, not all of which are universally popular in this country—from Olympic-specific lanes onwards. The commitment to introduce the ban was made quite correctly by the previous Government, precisely because it was a requirement of the bid.

To be clear about the quote from the Home Secretary, which my hon. Friend quoted correctly, the fine was raised to that level and not a great deal higher—the hon. Member for Washington and Sunderland West (Mrs Hodgson) was a member of the Committee that dealt with this matter—although an amendment was tabled to do just that, in response to specific police advice about the appropriate fine and the seriousness of the threat. The Home Secretary did not dream it up for policy reasons; she was responding to a recommendation from the police.

[Mrs Hodgson]

As the Minister mentioned, I was a member of the Committee that considered that matter. We took evidence from the Metropolitan Police Commissioner, who, when I questioned him, said that he had evidence that the criminal activity that he was citing with regard to the fine having to be quadrupled to £20,000 also existed across the whole ticketing market. I pressed him to give his thoughts on whether the legislation should be extended, but obviously he said that it was not his place to say so. However, he gave evidence that this was rife across the whole ticketing world.

[Hugh Robertson]

After the hon. Lady’s private Member’s Bill was introduced, I undertook some checks with both the Home Office and the wider security services. I have checked with both the Metropolitan Police and the wider security services, and without going into too much detail about the information that they have given me, I regret to say that those organisations have told me that they think that we have the balance about right. They have said that this is a moving threat.

It is fair to say—it came across clearly in Assistant Commissioner Allison’s evidence to the Committee—that this is a new and growing threat. It is reasonably easy, through Operation Podium, to nail that down for the Olympics. However, the organisations that I mentioned do not feel—I really have asked them about this—that there is sufficient evidence at the moment for them to tell the Home Office, “Our legislative offer is deficient in this regard; we want a ban across the piece.” The police have not said that and neither, yet, have the security services.

I have asked the security services this specific question every time that we receive a briefing about intelligence behind a large range of threats to the Olympic games. We always ask about Operation Podium and the influence of large-scale criminal gangs, and the rest, on the games. The security services are happy that the current fine is sufficient to deter that activity. They are making good progress in targeting those who have offended and taking down dummy websites that have sprung up all around the place offering tickets that they cannot supply—people send off money out of misguided enthusiasm, but find that the thing is a complete sham.

At no stage, however, has anyone said that the threat is sufficient to support a more general ban. I shall come on to that in a minute, but I have an open mind. When that Rubicon is crossed, we will need to look at the matter very carefully, but I think that I have covered the Olympic-specific points, about the bid requirement and last year’s London Olympic Games and Paralympic Games (Amendment) Act 2011 being a response to a specific threat identified by the police and to a need for a higher penalty than the existing £5,000.

My hon. Friend the Member for Hove went through the range of opportunities open to event organisers, but I suspect that we are on slightly different sides of the argument. The Government are keen for event organisers to look at all the options currently available to them before we legislate, whether paperless tickets or photo IDs, although I recognise what he said about some of the shortcomings in given situations.

--- Later in debate ---

[Hugh Robertson]

Indeed it is, and intellectual property and all the rest are a hot topic at the moment. There is no point in my pretending that there is anything other than a range of views. Both parties include people who believe that secondary ticketing and exchange are a perfectly reasonable way for individuals to buy tickets. It is an open market and people should be allowed to do that. There are a range of views; but, for myself, although I always have to defend the Government’s line, I have a very open mind. I am perfectly happy for us to give guarantees to events with such a bid requirement—I have no ideological problem with that at all.

[Mrs Hodgson]

Following on from the point made by the hon. Member for Hove, I have had representations from people who consider that a ticket is nothing more than a receipt for access to an event. Some very clever people, including some studying law in university, are researching whether there is a case in law to find that selling on such a receipt is illegal. It is a ticket, but it is actually a receipt, to take part in an experience, and it is not something in and of itself.

[Hugh Robertson]

I am dangerously close to being out of my depth. I studied a little law at university, getting close to 30 years ago now, a bit more military law when I joined the Army and a little banking law 15 years or whatever ago, but I am not an expert. That is the first I have heard of that idea, but if someone is able to prove such a case legally, clearly the terms of the whole debate will be changed.

At the moment, I have an open mind and am happy to grant the necessary exemptions if required by a bid, but as a Government we are not yet ready to move beyond that. If the case can be proved and a particularly strong one can be made about criminality, we are open to that.

[Hugh Robertson]

I most certainly give my hon. Friend that undertaking. I had better tread carefully, but there are a lot of things that the French do differently throughout sport and the wider entertainment industry. For example, they have a betting law around image rights, so that sports bodies can gain money from the betting industry that they can reinvest in grass-roots sports—many of the bodies are keen on that. Other things they do not do: they do not have a national lottery, which keeps many of our sports and arts events going. I will, absolutely, look at the French example, although that is not to say that, if it is a success, we will necessarily incorporate it directly into practice.

[Mrs Hodgson]

I am very grateful to the Minister for giving way again, and I realise that we are operating a pincer movement on him at the moment. One of the responses that the Secretary of State gave at the meeting the hon. Member for Hove and I had with him was that the issue could be looked at again if market failure, and not only criminality, was demonstrated. The Minister mentioned the investigation by the OFT, which I wrote to following the “Dispatches” programme to ask it to look at market failure. He cannot go into such details perhaps, but I think that the OFT will find demonstrable market failure, so would the Government then look at this again?

[Hugh Robertson]

Absolutely. Personally, as the Minister responsible, I have an open mind, as I said. The OFT is another good example, because if its investigation were to demonstrate market failure, we would clearly have to look at the market, to analyse the failure and to see what can be done, if appropriate, to put things right. That would most certainly change the debate, as would a firm police or security services commitment that large amounts of money were now being laundered through the secondary market and that not having legislation was helping criminal gangs.

I shall try to wrap up my comments, given the time. The position remains that we have an open mind on secondary ticketing. We are happy to legislate for events with a bid requirement, but we do not think that there is yet an absolutely sound case for a more general ban. We will keep an open mind, however, and look at the case as the months progress.